Introduction

The Pakistani banking industry has witnessed significant growth in recent years, with both Islamic and
conventional banks playing a crucial role in the country's financial landscape. While conventional banks
have traditionally dominated the market, Islamic banking has gained increasing traction in recent years,
driven by a growing demand for Shariah-compliant financial products and services.

One of the key factors that has contribute

d to the growth of Islamic banking is its focus on ethical and socially responsible investing. Islamic banks
adhere to strict Shariah principles that prohibit interest-based transactions, gambling, and investments
in certain industries, such as alcohol and pork production. This ethical framework has attracted a
growing number of customers who are seeking to align their financial decisions with their religious
beliefs.

Despite the growth of Islamic banking, there remains debate regarding the relative profitability of
Islamic and conventional banks. Some studies have found that Islamic banks are less profitable than
conventional banks, while others have found no significant difference in profitability between the two
types of banks.

This study aims to investigate the impact of bank size on the profitability of Islamic and conventional
banks in Pakistan. We will use a dataset of Pakistani banks to analyze the relationship between bank size
and profitability, and we will compare the results for Islamic and conventional banks.

Problem Statement

The profitability of banks is a key indicator of their financial performance. However, there is limited
research on the impact of bank size on the profitability of Islamic and conventional banks in Pakistan.
This study aims to address this gap in the literature by investigating the relationship between bank size
and profitability for both types of banks.

Research Questions

The following research questions will be addressed in this study:

1. What is the impact of bank size on the profitability of Islamic banks in Pakistan?

2. What is the impact of bank size on the profitability of conventional banks in Pakistan?

3. Is there a significant difference in the impact of bank size on the profitability of Islamic and
conventional banks in Pakistan?

Research Objectives
The objectives of this study are to:

1. Analyze the relationship between bank size and profitability for Islamic banks in Pakistan.

2. Analyze the relationship between bank size and profitability for conventional banks in Pakistan.

3. Compare the impact of bank size on the profitability of Islamic and conventional banks in
Pakistan.

Research Methodology

This study will use a quantitative research methodology. We will collect data on a sample of Pakistani
banks, including both Islamic and conventional banks. We will then use regression analysis to investigate
the relationship between bank size and profitability. We will also compare the results for Islamic and
conventional banks using t-tests.

Literature Review

A number of studies have investigated the relationship between bank size and profitability. The findings
of these studies have been mixed, with some studies finding a positive relationship between bank size
and profitability, while others have found no significant relationship or even a negative relationship.

A study by Berger (1995) found that there is a positive relationship between bank size and profitability in
the United States. The study found that larger banks are able to achieve economies of scale and scope,
which allows them to generate higher profits than smaller banks.

However, a study by Molyneux and Thornton (1992) found that there is no significant relationship
between bank size and profitability in the United Kingdom. The study found that the relationship
between bank size and profitability is complex and is influenced by a number of factors, such as the
competitive environment and the regulatory environment.

A study by Demsetz and Le Grand (1985) found that there is a negative relationship between bank size
and profitability in the United States. The study found that larger banks are more likely to experience
managerial inefficiencies and bureaucratic problems, which can lead to lower profits.

The findings of these studies suggest that the relationship between bank size and profitability is complex
and is influenced by a number of factors. Further research is needed to investigate this relationship in
more detail.

Expected Findings

We expect to find that there is a positive relationship between bank size and profitability for both
Islamic and conventional banks in Pakistan. This is because larger banks are able to achieve economies
of scale and scope, which allows them to generate higher profits than smaller banks.
We also expect to find that there is no significant difference in the impact of bank size on the
profitability of Islamic and conventional banks in Pakistan. This is because both types of banks are
subject to the same regulatory environment and operate in the same competitive market.

Limitations of Study

This study has the following limitations:

 The study is limited to a sample of Pakistani banks, and the findings may not be generalizable to
other countries.

 The study is limited to a single point in time, and the findings may not be representative of the
long-term relationship between bank size and profitability.

 The study is limited to a single measure of profitability, and the findings may not be
representative of other measures of profitability.

References

Berger, A. N. (1995). The economics of bank capital adequacy regulation. Journal of Banking and Finance